Everything You Need to Know about Atomic Swaps, and How Komodo is Advancing the Technology

Over the last several years, at Komodo we have quietly worked with a blockchain innovation called “The Atomic Swap,” a technology seen recently in the news. The growth of this technology throughout the entire market shows an exciting future where cryptocurrencies can be accessible to the average user. The Komodo Platform is the first exchange to support atomic swaps, and we have even forged our own unique variations of the protocol, advancing the technology beyond its previous capabilities.

Atomic Swaps Allow You to Trade From Blockchain to Blockchain, From Within Your Wallet

An atomic swap is a direct trade between two different coins running on two separate blockchains; there are no centralized-exchange websites or other third-parties required for this trade. The technology enables common users to bypass the labyrinth of website-exchanges currently necessary to purchase cryptocurrencies. Once implemented, the atomic swap will allow common users to trade and purchase any desired coin directly within their own wallets.

The news regarding atomic swaps began among developers at the time of Bitcoin’s successful implementation of a separate technology called SegWit. The advancements of Segwit are vast, providing many new features, including the foundation for future Bitcoin atomic swaps.

A few weeks later, “Atomic Swaps” filled the mainstream news again when Charlie Lee, founder of Litecoin, tweeted about his notable accomplishment: a successful swap between two of the oldest cryptocurrencies, Litecoin and Bitcoin.

Alongside Litecoin there are many other blockchain projects, including Komodo, that are successfully conducting swaps, and the widespread recognition of their importance is a promising sign of the technology’s future success.

Atomic Swaps Reduce: Risk, Manipulation, and Human Error

Atomic swaps tear down many major roadblocks, foremost among them being a current lack of security in cryptocurrency trading. The present method of exchanging one cryptocurrency for another requires traversing a jungle of centralized exchanges, where inefficiencies, manipulation, and even human error can result in financial loss. Because atomic-swap technology circumvents this path, the technology can eliminate the many accompanying dangers, thus providing safety.

Some who might question the importance of this technology might point to various “decentralized exchanges” as a different solution. One notable example is the decentralized Bisq service. However, while these types of exchanges do indeed resolve some issues, most suffer from the need to also use a “decentralized escrow system.” The lack of overall adoption in these escrow services shows that most decentralized exchanges have more progress to make before they can become practical to the average user.

Another option that we might mention are what are called “blockchain-based exchanges,” but these can only provide trades within their own blockchain, or side chains. This forces the trader to use a “proxy token,” like BitUSD or wBTC, and this is yet another complexity.

Therefore, while those alternate methods provide some relief, none is as effective as the atomic swap itself. With the new technology the process of trading is simple, direct, and decentralized. Although this technology is not yet prepared for the average user, the progress shown by SegWit, Charlie Lee, and many other projects, including Komodo; shows that the technology is drawing close.

Electrum Atomic Swaps: Komodo’s Unique Innovation Eliminates the Need to Download Any Blockchain At All

Komodo is already innovating beyond the current boundaries in atomic-swap technology. Presently, as is the case with other blockchain projects, Komodo only supports swaps if both participants in a trade have the blockchains downloaded to their local computers. However, we are in the process of releasing a technology that removes this requirement.

The need for our intended change is clear: Bitcoin, for example, requires a participant to download a +100 GB file. Such a size is unacceptable to the majority of users, especially those with low storage space.

The solution that Komodo is now testing we call, “Electrum Atomic Swaps.” These swaps eliminate the need to download any accompanying blockchain. This simplifies the process of trading cryptocurrencies for the average user, as they can now simply trade between coins on the Komodo exchange with a simple, lightweight wallet.

Despite the early stage in our development cycle, Komodo has already proved the Electrum Atomic Swap concept. Komodo’s JL777 recently conducted a successful electrum atomic swap on the Komodo platform, using Bitcoin and Komodo as the trading pair, and a member of the community thereafter repeated the process for verification.

Not long after this accomplishment, the Komodo team took yet another step forward. In the old method, the atomic-swap code could only perform one swap at a time (per server performing the operation). Now, we have enabled a feature that can allow the code running the Komodo network to handle up to five swaps or more at once (again, per server performing the code tasks). This exponentially increases our ability to handle a large customer base.

The culmination of Komodo’s effort is shown forth in The Komodo BarterDex, our decentralized exchange, which has several unique features. As previously mentioned, it is already capable of performing atomic swaps, and it is the first decentralized exchange to adopt this feature; the forthcoming Electrum Atomic Swap is yet another useful tool.

Furthermore, the Komodo BarterDex also provides a “decentralized order-matching service.” The term “order-matching” refers to how people place an order on an exchange to swap for their desired currency, and how their human counterparts accept the offers. The Komodo BarterDex is unique because this “decentralized order-matching service” removes the need for traders to communicate with each other. Instead, traders can place and take orders immediately, with no further coordination. This stands in contrast to all other decentralized exchanges.

Of course, Komodo is only one of many blockchain projects that are experimenting with atomic swaps. Other interesting methods may arise in the future, such as the governance-focused Decredcoin, the semi-decentralized Lykke exchange, and the BlockNet project. Having a vigorous development environment promises to expand the market for everyone, and Komodo is excited to work together with the blockchain community.

Through the many features of Komodo, and the open-source philosophy we embrace by sharing our Electrum Atomic Swap technology, we believe the Komodo project is a stand-out candidate in the future of cryptocurrency trading.